AEP to Shed Ohio, Indiana Coal and Gas Plants in Move for Full Regulation
In an effort to become a fully regulated power company, American Electric Power (AEP) has agreed to sell four Midwestern power plants-representing a total of 5.2 GW-to a newly formed joint venture of Blackstone and ArcLight Capital Partners for about $2.17 billion.
AEP will sell:
- the 1,186-MW natural gas-fired Lawrenceburg Generating Station in Lawrenceburg, Ind.
- the 840-MW natural gas-fired Waterford Energy Center in Waterford, Ohio
- the 507-MW natural gas-fired Darby Generating Station in Mount Sterling, Ohio
- the 2,665-MW coal-fired Gen. James M. Gavin Plant in Cheshire, Ohio
All generating capacity is located in the region served by PJM Interconnection.
The sale is expected to close in the first quarter of 2017, but it is subject to regulatory approvals from the Federal Energy Regulatory Commission (FERC), the Indiana Utility Regulatory Commission, and federal clearance pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, AEP said.
Moving on Out
Efforts to formalize a power purchase agreement that would have supported continued operation of AEP and FirstEnergy generation capacity in Ohio were punctured by the Federal Energy Regulatory Commission (FERC) on April 27, though the Public Utilities Commission of Ohio (PUCO) had blessed the deal just a month before.
Consumer groups fought the deals, which guaranteed above-market rates for eight years, suggesting that they amounted to "corporate welfare."
AEP, which owns 2,677 MW of additional competitive generation in Ohio, said it "is continuing an independent strategic evaluation of that generation while also working on the restructuring of Ohio electricity regulations to allow those assets to be acquired by AEP Ohio for the benefit of its customers. AEP also is continuing a separate strategic review of its 48-MW hydroelectric Racine Plant in Racine, Ohio.
An Exodus
AEP isn't alone in taking drastic measures. This July, FirstEnergy said it would sell or deactivate 856 MW of coal-fired generation in Ohio to reduce fleet operating costs.
And in 2014, Duke Energy, the largest electric utility in the U.S. in terms of market value, made headlines when it announced it would transition its generating fleet away from volatile organized wholesale markets. Eleven of the company's 13 plants (a total 6.6 GW of capacity) were in Ohio, one in Illinois, and one in Pennsylvania. All sold power in PJM.
Across the nation, meanwhile, power companies that own coal and nuclear generation are exiting-or want to exit-some markets that foster competition.
States, regulators, and market participants have in recent years called attention to what they say is an alarming trend concerning the withdrawal of uneconomic baseload generation from organized wholesale markets, specifically in ISO New England, New York Independent System Operator, MISO, PJM, and the Electric Reliability Council of Texas.
For more see "SLIDESHOW: An Alarming Trend Affecting Baseload Power."
On August 1, New York's financially struggling upstate nuclear power plants received a much-needed lifeline with passage of the New York State Public Service Commission's Clean Energy Standard. The Clean Energy Standard requires all six New York investor-owned utilities and other energy suppliers to pay for the intrinsic value of carbon-free emissions from nuclear power plants by purchasing "Zero-Emission Credits." The plants will begin receiving subsidies in 2017.
-Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)
The post AEP to Shed Ohio, Indiana Coal and Gas Plants in Move for Full Regulation appeared first on POWER Magazine.